bostonbubble.com

[CL]

I think easy credit contribute to the strength of the overall market, but not the relative "immunity" of those towns. The fact is there are areas that are more desirable and areas that are less desirable. School, commute, whatever. And if you can suddenly afford a 500-600K house instead of a 350-450K house due to low rate, most people will upgrade the location (say from Watertown to Newton) rather upgrade the house (400K house to 600K house in Watertown).

That explains why these towns dropped less in 2007-2009, and modestly recover (or stay somewhat flat) while other less desirable region continue to languish.

[CC]

My friend is a recent retired realtor who worked about 30 years around Lexington. She said if a house is priced right (around 2004 price), it could be sold in less than 2 weeks in Lexington. But if the seller is still asking for about the peak price, it will just sit and sit forever.

I think it's understandable. Since some mid-priced towns are going back to about 2001 price, some most desirable expensive towns like Weston and Lexington could be priced around 2004 or even 2005 level now.

However, they are all coming down...... "slowly" partly because of the artificial low interest rate which supports high price and robs us, the savers.

[Kaidran]

I can see the general price drop in those towns too but tempered by "eliteness". If you look back at Belmont vs Arlington over the last 10 years Arlington has increased a lot were Belmont has been high since 2000 but did not have the same run up during the 2000s. Purely anecdotally I see many more listings in Arlington this year than previous years, while the listings in Belmont have been consistently few. My theory is that immune status will remain as long as there are professional salaries to support them. As those salaries decrease those professionals will tend to group in certain towns and create a rank order or "immunity". As the number of buyers drop the lowest on the list will drop off and the prices will drop more precipitously.

I am particularly interested to see how the Arlington prices change over this and future years. This is the town that I think that was thought to be immune 3 years ago but it currently dropping off the list.

[CL]

I think, for a good immunity/defensiveness town, needs to have 3 things

1. Lack of land, or completely build out
2. Good to great commute options (either public transport or highways) and proximity to high income jobs (probably in Boston)
3. Good to great school system (say top 25)

#1 put a cap and constrain supply, #2 and #3 create attractiveness of the town that is unlikely to depreciate, thus maintain demand.

There is not a lot of towns that have all 3. I personally don't consider Weston/Dover/Sudbury/Wellesley/Hingham as immune town because of #1 and #2. They are good towns and expensive for sure but I can imagine their value drops 10-15% easy. Towns like Brookline, Winchester, to a lesser extent Belmont and Newton, are much more defensive than other W towns.

I don't think Arlington is immune coz their school system is okay but not elite (similar to Natick in my view), and commute is okay but not great. If I am forced to choose between Arlington and Natick, I probably pick Natick. But that's just me.

[john p]

I was playing around with the link Admin posted earlier:

http://www.city-data.com/

I was looking into the relationships of immune towns next to less immune towns i.e. Belmont and Arlington. I grew up in Lynnfield and our rival was North Reading. Lynnfield was considered the rich town and North Reading the working class town. Things have changed.

Household Income Estimates from link above

2000 Belmont - $80,292
2009 Belmont - $96,706

2000 Arlington - $64,344
2009 Arlington - $84,907

2000 Lynnfield - $80,626
2009 Lynnfield - $86,133

2000 North Reading - $78,962
2009 North Reading - $98,797

let's test Wakefield which touches both of these towns...

2000 Wakefield - $66,117
2009 Wakefield - $87,550

for the same reasons, how about Reading

2000 Reading - $77,059
2009 Reading - $99,006

What this tells me is that although most of us real estate junkies share commonalities in discussing more macro forces, there may be more meso or regional county level forces acting upon the markets.

For example, if I had to explain North Reading versus Lynnfield, I would say that all the growth of new office buildings at the intersection of Route 128 and 93 have added a lot more jobs in that concentrated area and North Reading is right there. North Reading has an exit on 128 and 93.

To test this out, I'll check out Wilmington which is closer to this intersection.

2000 - Wilmington - $70,652
2009 - Wilmington - $93,686

How about cranking a little further west to Lexington

2000 - Lexington - $96,825
2009 - Lexington - $132,921

I lived about a couple of years in Waltham, and was speaking with someone who said that Moody Street had gone down hill in the past few years....

2000 - Waltham - $54,010
2009 - Waltham - $65,238

how about Watertown

2000 - Watertown - $59,764
2009 - Watertown - $72,372

Now Newton...

2000 - Newton - $86,052
2009 - Newton - $108,686

Weston

2000 - Weston - $153,918
2009 - Weston - $197,587

This data leads me to think that the macro forces of certain industries enjoying more gains during this period i.e. finance and medical saw steeper salary gains and the regions of Massachusetts which had a higher concentration of these workers saw the highest increases. I imagine this is stating the obvious, but sometimes it is good to try to confirm it.

Two things though, is sometimes the bigger they are, the harder they fall? Also, a portion of the State Tax Revenue that goes in to the State goes back out to the towns in the form of Local Aid. Local Aid is based on formulas and an important factor is household income

http://www.mass.gov/?pageID=dorterminal&L=4&L0=Home&L1=Local+Officials&L2=Municipal+Data+and+Financial+Management&L3=Data+Bank+Reports&sid=Ador&b=terminalcontent&f=dls_mdmstuf_aag_aagindex&csid=Ador

On page 2 of Arlington - you can see that 12.67% of their Revenue is State Aid. You have to wonder if due to the household income increase if that will remain at that leve.

Keep in mind that many outside of the 495 Belt did not see these big household income gains. I wouldn't be surprised if the whole distribution of State Aid will look quite different. This basically means the State either redoes its formula for State Aid or the areas within 128 will get less Local Aid and more will spread out to the communities that did not get lifted quite as much from the Bubble years?

[Kaidran]

Very interesting idea to look at salaries. How do these track with simple inflation? I added the % increase over the 9 years. I guess it is hard to separate the "rich getting richer" phenomenon, which I'd guess is prevalent in Weston/Lexington, but interesting growth in towns like Arlington and Wilmington. I know the Wilmington prices have been taking a beating, and I already posted my suspicion about Arlington.

2000 Belmont - $80,292
2009 Belmont - $96,706
20%

2000 Arlington - $64,344
2009 Arlington - $84,907
32%

2000 Lynnfield - $80,626
2009 Lynnfield - $86,133
7%

2000 North Reading - $78,962
2009 North Reading - $98,797
25%

2000 Wakefield - $66,117
2009 Wakefield - $87,550
32%

2000 Reading - $77,059
2009 Reading - $99,006
28%

2000 - Wilmington - $70,652
2009 - Wilmington - $93,686
33%

2000 - Lexington - $96,825
2009 - Lexington - $132,921
37%

2000 - Waltham - $54,010
2009 - Waltham - $65,238
21%

2000 - Watertown - $59,764
2009 - Watertown - $72,372
21%

2000 - Newton - $86,052
2009 - Newton - $108,686
26%

2000 - Weston - $153,918
2009 - Weston - $197,587
28%